Sharing Residual Liability: 'Cheapest Cost Avoider' Revisited

Posted: 29 Jun 2013 Last revised: 14 Feb 2019

See all articles by Emanuela Carbonara

Emanuela Carbonara

University of Bologna - Department of Economics

Alice Guerra

Copenhagen Business School

Francesco Parisi

University of Minnesota - Law School; University of Bologna

Date Written: January 2016

Abstract

Economic models of tort law evaluate the efficiency of liability rules in terms of care and activity levels. A liability regime is optimal when it creates incentives to maximize the value of risky activities at the net of accident and precaution costs. The allocation of primary and residual liability allows policymakers to induce parties to undertake socially desirable care and activity levels. Traditionally, tort law systems have assigned residual liability either entirely on the tortfeasor or entirely on the victim. In this paper, we unpack the "cheapest cost-avoider" principle (Calabresi, 1970) to consider the virtues and the limits of loss-sharing rules in generating optimal (second-best) incentives and allocations of risk. We find that loss-sharing may be optimal in the presence of countervailing policy objectives, of homogeneous risk avoiders and of subadditive risk, potentially offering a valuable tool for policymakers and courts in awarding damages in a large number of real-world accident cases.

Keywords: loss-sharing, comparative non-negligence, cheapest cost-avoider

JEL Classification: K13, K32

Suggested Citation

Carbonara, Emanuela and Guerra, Alice and Parisi, Francesco, Sharing Residual Liability: 'Cheapest Cost Avoider' Revisited (January 2016). The Journal of Legal Studies 2016 45:1, 173-201; Minnesota Legal Studies Research Paper No. 13-47. Available at SSRN: https://ssrn.com/abstract=2287209 or http://dx.doi.org/10.2139/ssrn.2287209

Emanuela Carbonara

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
Bologna, 40126
Italy
+39 051 2098149 (Phone)
+39 051 2098040 (Fax)

Alice Guerra (Contact Author)

Copenhagen Business School ( email )

Porcelænshaven 24A
Frederiksberg, 2000
Denmark
+45 15 35 37 (Phone)

HOME PAGE: http://https://sites.google.com/site/aliceguerrahome/home

Francesco Parisi

University of Minnesota - Law School ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States

University of Bologna ( email )

Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy

Register to save articles to
your library

Register

Paper statistics

Abstract Views
1,583
PlumX Metrics
!

Under construction: SSRN citations while be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information